Monday, October 27, 2008

Bloodbath in the markets continues

Asian stocks plunged today, for the fourth day in a row, on concern (panic) economic stimulus measures (bumbling government policies) will fail to stop a global slowdown (recession).

Japanese shares fell to their lowest level in 26 years and the Hang Seng had its biggest one-day decline since 1997, closing down 12.7%. Meanwhile, trading halts were triggered in the Philippines and Thailand after the country's benchmark gauges lost 10%.

Japan's Prime Minister, Taro Aso, said he'd draft measures to help counter the financial crisis. For some reason, Mr Aso’s clear and definitive plan had no effect on the sell off. Perhaps Mr Aso should have threatened to write a strongly worded memo?

Meanwhile, in South Korea, the Bank of Korea slashed its benchmark interest rate by 75 basis points to 4.25 per cent and said it would buy up to Won10,000bn ($7bn) of bank bonds to provide more liquidity to the banking sector. The action came as President Lee Myung-bak said the local currency was stable and the country was far from repeating the Asian financial crisis a decade ago … ops, did he say that out loud? Mentioning the fact that South Korea required a $57bn bail-out from the IMF to avoid a national default during ’97-’98 Asian financial crisis was probably not the best way to calm the markets.

In response to a question about the Bank of Korea’s actions, Steve Hanke, professor of applied economics at Johns Hopkins University, noted that the rate cut “won't make much difference right now." His reasoning, which I think is on the money, is that “they're really in the middle of a complete panic and probably part of the panic has been created internally by making a kind of ad hoc policy. They don't seem to really have a coherent game plan.” I pretty sure Prof. Hanke’s comments apply to all the economies in the region at the moment.

I think it is time to start selling my patented integrated futon-safe invention. You heard it here first.

About Me

I was born in 1979, the son of two medical professionals. I grew up in good health in Wellington, New Zealand, a city known for being a high earthquake risk area and the capital of a nation nobody can place on a map.
Due to a lack of imagination I completed bachelor degrees in law and economics from Victoria University of Wellington and a graduate diploma in finance from the Financial Services Institute of Australia. To pay off my then ridiculous student loan, I became a corporate whore and worked for four years in NZ at a major financial services firm, specialising in financial modeling, valuation advice and public finance consulting.
In 2008 I moved to Hong Kong and offered up my soul to the lords of merges and acquisitions. I worked non-stop for two years in corporate finance, specialising in deal structuring, lead transaction advisory and financial due diligence. Then in early 2010, I realised that a career in finance was not for me.
So instead I’ve set about rediscovering myself as a writer, designer and game developer ... keep an eye on this space as the story continues.